10:40 PM
Asia markets take China tightening in stride
Addison Ray
By Ian Chua
SYDNEY | Mon Jan 17, 2011 12:28am EST
SYDNEY (Reuters) - Investors in Asia generally took China's latest move to fight inflation in their stride on Monday, with Japan's Nikkei posting modest gains, while the euro slipped as the market waited to see if governments will beef up a euro zone rescue fund.
Upbeat earnings from JPMorgan (JPM.N) helped lift some financial stocks in the region, but mining stocks struggled after China on Friday raised banks' required reserves (RRR) for the fourth time in over two months, fuelling worries the country's voracious appetite for commodities will cool.
"With growth still strong, Beijing will likely battle inflation wholeheartedly. Get ready for more hikes in both RRR (at least another 150 bps) and interest rates (two, 25 bps) in the next six months," HSBC economists Qu Hongbin and Sun Junwei wrote in a report.
Japan's Nikkei index .N225 rose 0.4 percent, helped in part by gains in financial shares. Sumitomo Mitsui Financial Group (8316.T) climbed 0.7 percent.
"The market is recouping losses made last week and sentiment has been brightened by financials gaining on a strong start to the U.S. earnings season," said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets.
Stocks elsewhere in Asia were more subdued, with MSCI's index of Asia Pacific shares excluding Japan .MIAPJ0000PUS slipping 0.3 percent.
Hong Kong's Hang Seng index .HSI, Australia's S&P/ASX 200 index .AXJO and China's Shanghai Composite Index .SSEC were all lower. South Korea's KOSPI .KS11 hit a record high at 2,118.86, before paring gains to be little changed on the day.
Global miners BHP Billiton (BHP.AX) and Rio Tinto (RIO.AX) both fell about 1.0 percent.
According to EPFR Global, flows into the emerging market equity funds that it tracks slowed in the week ended January 12 due to worries that high inflation rates will trigger more measures to rein in price pressures.
But underlying appetite for risk persisted, with emerging market local currency and high yield bond funds enjoying solid weeks, EPFR noted.
Asian high-yield bond issuers have wasted no time this year in taking advantage of the healthy appetite for their paper.
Last week, PRC property developer Evergrande Real Estate Group made history with a 9.25 billion yuan ($1.4 billion) synthetic renminbi bond issue, the biggest to date in the fast growing market.
EURO ZONE MEETING EYED
The euro slipped to $1.3338, having rallied some 4 percent last week to reach $1.3456 on Friday -- a high not seen since mid-December.
European Central Bank President Jean-Claude Trichet's tough talk on fighting inflation and expectations that the EFSF rescue fund will be expanded had helped underpin euro.
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